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Research Questions

How many states have said they will opt out of Medicaid expansion as specified by the Affordable Care Act?

How are coverage and spending affected if the states opt out?

Are there other policy options that could address a coverage gap?

Abstract

The US Supreme Court's ruling on the Affordable Care Act in 2012 allowed states to opt out of the health reform law's Medicaid expansion. Since that ruling, fourteen governors have announced that their states will not expand their Medicaid programs. We used the RAND COMPARE microsimulation to analyze how opting out of Medicaid expansion would affect coverage and spending, and whether alternative policy options—such as partial expansion of Medicaid—could cover as many people at lower costs to states. With fourteen states opting out, we estimate that 3.6 million fewer people would be insured, federal transfer payments to those states could fall by $8.4 billion, and state spending on uncompensated care could increase by $1 billion in 2016, compared to what would be expected if all states participated in the expansion. These effects were only partially mitigated by alternative options we considered. We conclude that in terms of coverage, cost, and federal payments, states would do best to expand Medicaid.

Key Findings

As of mid-April, 2013, 14 states have said they will opt out of Medicaid expansion.

If they do, 3.6 million fewer people would be newly insured.

Those states could spend about $1 billion more on uncompensated care in 2016.

Those states would receive $8.4 billion less in federal payments.

Overall, Medicaid expansion is an effective way for states to expand insurance coverage.

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